Flextech set to buy Granada Sky TV

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FLEXTECH, BRITAIN's largest producer of basic-tier television channels for cable and satellite, is close to buying BSkyB's 9.5 per cent interest in Granada Sky Broadcasting in a deal that would value the company at some pounds 160m, people familiar with the situation said last night.

The terms of the buyout of BSkyB's interest, which would be valued at pounds 15m, weren't immediately available.

Flextech is also understood to be prepared to buy out Granada's 90.5 per cent interest in GSkyB, but no agreement has yet been reached. One option is for Flextech to swap its 18.6 per cent interest in Scottish Media, worth pounds 105m, for Granada's GSkyB stake.

In March, Granada paid pounds 110m for Mirror Group's 18.6 per cent holding in Scottish.

GSkyB broadcasts three channels distributed over satellite, cable and ONdigital. Its channels include Men & Motors, repeats channel Granada Plus and Breeze, which offers woman's lifestyle and entertainment programming. Launched in late 1996, the venture was designed to match Granada's programming library with BSkyB's pay-TV marketing and distribution muscle.

The channels reach 95 per cent of UK multichannel homes and attract 3 million viewers a week, but are not believed to be profitable. After launch in late 1996, GSkyB was hurt by low viewership and underwent a number of changes in management and its channel portfolio.

Much of the original output of the channels is produced at a dedicated digital studio facility in Manchester owned by Granada. It is expected that Granada would continue to supply original programming as well as repeat programs such as Coronation Street.

Adam Singer, chief executive of Flextech, has said the company's scale exercises a "gravitational" pull on other channels. He has been negotiating to acquire the GSkyB channels for some weeks and is also thought to be looking at the possible acquisition of cable-only channel LiveTV from Mirror Group.

"Everybody faces the same issue of scale and the problem of cross promotion," Mr Singer said recently, while declining comment about any acquisitions.

"Clearly, if you have 12 channels you're in a much better position than if you have three. I think you'll see us increase our portfolio."

Granada shares closed up 36p at 663p, while BSkyB ended up 3.5p at 594p. Shares in Flextech were unchanged at 1020p.